Borrowing is much more difficult for freelancers and the self-employed than for employed workers, as their income is sometimes subject to strong fluctuations. In addition, lenders often do not trust the proof of income created by the entrepreneurs themselves.
The tax assessment is also only of limited use as proof of annual earnings, since tax law allows the legal shifting of profits into a selected year in some respects. Lenders also fear that some of their self-employed customers will report excessive profits to the tax office in order to improve their creditworthiness. Does debt restructuring make sense for the self-employed even though they find it difficult to get a loan?
Possibilities and limits of debt restructuring
From a tax point of view, but also in order to keep a clear overview of business and privately caused negative balances, professional and personal loans remain separate even after a debt restructuring of the self-employed. Of course, there is also the option of redeeming the business loan and booking the amount spent as a private deposit. However, given the tax deductibility of business-related loan interest, this process is uneconomical. Any debt restructuring measure only makes sense if it leads to lower borrowing costs. In exceptional cases, the self-employed can accept higher borrowing costs after a debt rescheduling if this increases the term of a loan taken out and reduces the monthly charge accordingly. Self-employed people tend to use their checking account to process private loans, especially since they do not have to submit a special loan application.
Most banks accept any kind of cashless incoming payments for the calculation of the possible amount of the overdraft facility, so that the private withdrawals transferred from the business account to the private checking account lead to an acceptable overdraft facility. The disadvantage is the high overdraft interest, so that rescheduling always includes the overdraft facility used. Other loans are often subject to unreasonably high interest rates because the paying institution generally classifies self-employed persons as a bad risk. The aim of rescheduling is therefore to obtain lower interest rates than previously.
It is not always sensible to include all loans in debt restructuring
The advertising statement that after a debt rescheduling all loans are only repaid to a credit partner, the content is not wrong. In the case of debt rescheduling for the self-employed, it only applies to private or business loans, since these continue to remain separate. In addition, the reduction in the number of credit partners for the self-employed does not make any real simplification, since debiting the credit installments from the business account and the private checking account does not involve any work for the account holder.
This means that discounted loans such as dealer loans, real estate loans and vehicle financing can be disregarded when rescheduling, because the new loan is certainly more expensive than a discounted acquisition loan. The same applies in the business area to all promotional loans. It is most likely that self-employed debt restructuring will be approved by local Lite Lender and Cream Bank.